Trump – one year on

A year on from Donald Trump’s election as US president, political and economic pundits are grappling with a big question: what is the significance of Trump? Is his presidency a boorish blip or a symptom of deeper malaise?

Before Trump’s election, markets were fearful about the ‘bad things’ that he promised – American isolationism and economic protectionism: the US’s withdrawal from the wider world and the tearing up of trade agreements. But from 8 November, they pivoted to focus on ‘good Trump’ – the promises of infrastructure-led fiscal stimulus and tax reform. That, in part, is why we saw the S&P 500 soar to successive record highs over the past year.

But over that period, neither the ‘good’ nor the ‘bad’ has come to pass. So both the hopes and fears have been moderated. What have we got instead? Well, nothing much. Frustrated both by the vaunted checks and balances of the US system and by resistance within his own party, Trump has so far been unable to achieve any notable progress at all.

What happens next?

So what happens next? Does Trump learn how to operate within the US political system, rather than within the Twittersphere, or does he continue to rail against it? Don’t bet on the former. But don’t bet, either, on Trump stepping down or even being ousted in three years’ time. His bafflement at how difficult the job of president is appears to be matched only by his appetite to keep on doing it. The investigation into possible Russian collusion in his election campaign and a succession of other scandals appear to have had little impact so far.

The grievances that propelled him to power are still very much in place.

Meanwhile, the domestic conditions that paved the way for Trump’s victory remain intact. The gulf between the coastal cities and the flyover states is as great as ever, and Trump has done nothing yet to tackle the plight of regions struggling with decaying industry, mounting insecurity and the growing opioid epidemics. Ironically, that means that the grievances that propelled him to power are still very much in place. America’s appetite for controversial candidates has yet to abate, judging by the recent selection of Roy Moore as the Republican candidate for U.S. senator in Alabama in December’s special election.

Will confirmation bias and the backfire effect apply? Voters who plumped for Trump last time might double down in 2020, despite a lack of any progress in tackling the problems they face. That’s certainly a possible outcome. On the other hand, Trump’s election could signal the death knell for populism, precisely because he’s been so undignified and ineffectual. Many commentators took the Brexit vote and Trump’s election as harbingers of a populist wave sweeping the Western world. But the predicted upheaval hasn’t really come to pass – with defeat for populist candidates in several European countries this year. An unsuccessful Trump presidency might mark a turning point.

Fighting fire with fire

That raises the question, too, of who the Democrats will field against Trump in 2020. The narrative now is that a populist candidate is needed to fight fire with fire – a Bernie Sanders or an Elizabeth Warren. But it may be that a candidate with statesmanlike qualities will be better placed. We should not forget that Hillary Clinton won the lion’s share of the popular vote, the flaws of her character and campaign notwithstanding. Someone with similar qualities but without the baggage might avoid the risk of Trump simply out-Trumping a mirror-image populist opponent.

So much for home. What of abroad? This week, Trump has been meeting Xi Jinping in Beijing. His power shored up after the Communist Party’s recent National Congress, the Chinese president enjoys an authority and ability to get things done that Trump can only dream about. Xi has leverage over North Korea that Trump lacks, and Trump’s withdrawal from the Trans-Pacific Partnership, vacillation in support for Taiwan, and isolationist instincts leave a vacuum that China will be all too happy to fill.

And that might be the real significance of Trump. Through ineffectual, or at least limited, government at home and confusing bluster abroad, his presidency can be seen as accelerating the decline of the US as a global force – just as China’s rise continues and Russia seeks to increase its influence through both hard and soft power. In the years ahead, therefore, we may come to see Donald Trump as the unwitting midwife of a multipolar world.

The article above was previously published on Aberdeen Asset Management’s ‘Thinking Aloud’ blog on 15th November 2017

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